Q1. With respect to the Prudent Man Rule and the Prudent Investor Rule, which of the following statements is least accurate?

A)   An investment that is not appropriate under the Prudent Man Rule may be appropriate under the Prudent Investor Rule.

B)   Both impose discretion in choosing investments.

C)   The Prudent Investor Rule imposes an ordinary standard of care.

Q2. Which of the following statements represent the most important aspect of the Prudent Man Rule?

A)   Using caution and being conservative in the selection of investments.

B)   The fiduciary is generally forbidden from delegating their investment authority.

C)   Each investment is considered on its own merits, not in regard to the rest of the portfolio.

Q3. Which of the following statements regarding the Prudent Investor Rule (PIR) and the Prudent Man Rule (PMR) is most correct?

A)     The PIR is primarily results-oriented while the PMR is process-oriented.

B)     Under the PIR restrictions on investment in categories of securities have been codified.

C)     Under the PIR no particular investment is either prudent or imprudent.

Q4. Mary Rutherford, CFA, is considering the purchase of Greenbelt Paper's stock in an upcoming initial public offering (IPO) for a portfolio that she serves as trustee. She has performed the necessary research and believes that the stock satisfies the fund's risk/reward requirements. Under the Prudent Man Rule, Rutherford would:

A)   not be allowed to buy the IPO, because the transaction is considered too risky.

B)   be allowed to buy the IPO as well as any options on the stock.

C)   be allowed to buy the IPO.

Q5. Mary Rutherford, CFA, is considering the purchase of Greenbelt Paper's stock in an upcoming initial public offering (IPO) for a portfolio that she serves as trustee. She has performed the necessary research, and believes that the stock satisfies the fund's risk/reward requirements. Under the Prudent Investor Rule, Rutherford would:

A)   be allowed to buy the IPO.

B)   not be allowed to buy the IPO because the transaction is considered too risky.

C)   not be allowed to buy the IPO but could instead purchase a large position in the secondary market.

答案和详解如下：

Q1. With respect to the Prudent Man Rule and the Prudent Investor Rule, which of the following statements is least accurate?

A)   An investment that is not appropriate under the Prudent Man Rule may be appropriate under the Prudent Investor Rule.

B)   Both impose discretion in choosing investments.

C)   The Prudent Investor Rule imposes an ordinary standard of care.

Correct answer is C)

The Prudent Investor Rule imposes a “professional” standard of care. The Prudent Investor Rule may allow an investment in an asset, based upon diversification benefits, when the Prudent Man Rule would not allow investing in that asset. Both rules impose discretion in choosing investments.

Q2. Which of the following statements represent the most important aspect of the Prudent Man Rule?

A)   Using caution and being conservative in the selection of investments.

B)   The fiduciary is generally forbidden from delegating their investment authority.

C)   Each investment is considered on its own merits, not in regard to the rest of the portfolio.

Correct answer is A)

In general the Prudent Man Rule has been construed as a directive to preserve capital and avoid risk.

Q3. Which of the following statements regarding the Prudent Investor Rule (PIR) and the Prudent Man Rule (PMR) is most correct?

A)     The PIR is primarily results-oriented while the PMR is process-oriented.

B)     Under the PIR restrictions on investment in categories of securities have been codified.

C)     Under the PIR no particular investment is either prudent or imprudent.

Correct answer is C)

Under the PIR no particular investment is either prudent or imprudent. The decision is made based upon return vs. risk, where risk is measured by the asset’s impact on the portfolio.

Q4. Mary Rutherford, CFA, is considering the purchase of Greenbelt Paper's stock in an upcoming initial public offering (IPO) for a portfolio that she serves as trustee. She has performed the necessary research and believes that the stock satisfies the fund's risk/reward requirements. Under the Prudent Man Rule, Rutherford would:

A)   not be allowed to buy the IPO, because the transaction is considered too risky.

B)   be allowed to buy the IPO as well as any options on the stock.

C)   be allowed to buy the IPO.

Correct answer is A)

Under the Prudent Man Rule, entire classes of securities (options, futures, IPOs, etc.) were deemed imprudent. Hence, Rutherford would not be able to buy IPOs or options on stocks.

Q5. Mary Rutherford, CFA, is considering the purchase of Greenbelt Paper's stock in an upcoming initial public offering (IPO) for a portfolio that she serves as trustee. She has performed the necessary research, and believes that the stock satisfies the fund's risk/reward requirements. Under the Prudent Investor Rule, Rutherford would:

A)   be allowed to buy the IPO.

B)   not be allowed to buy the IPO because the transaction is considered too risky.

C)   not be allowed to buy the IPO but could instead purchase a large position in the secondary market.

Correct answer is A)

The new Prudent Investor Rule does not rule out entire classes of securities as does the old rule. However, the trustee must avoid speculation and undue risk. A large position of any stock would not be considered prudent, not to mention an untested stock. The higher fees could be construed as excessive fees and prohibited under the Prudent Investor Rule.

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